College Athletes Win Piece of $800 Million NCAA Broadcast Revenue

National Collegiate Athletic Association rules barring student athletes from seeking a share of its $800 million in annual broadcast revenue are illegal, a federal judge ruled in a decision that may sweep away players’ amateur status and opens the door for them to be paid.

The lawsuit, filed in 2009 by ex-college basketball player Ed O’Bannon, challenged the treatment of students as amateurs as college basketball and football evolved into multibillion-dollar businesses, with money flowing to the NCAA, broadcasters, member schools and coaches -- everyone but the players.

“The court finds that this restraint does violate antitrust law,” U.S. District Judge Claudia Wilken in Oakland, California, said in today’s decision. While the ruling was a victory for O’Bannon, Wilken limited the amount of money students can earn and said the NCAA could cap pay, although not below the cost of attending school.

The NCAA, member schools and broadcasters may be forced to negotiate licensing deals to pay college football and basketball players for appearing in live broadcasts of championship games, cutting into more than $16 billion in television contracts for the NCAA and its conferences. Current and former athletes could band together to bargain for group licenses, while star players potentially could hire agents.

Those deals would destroy the model that has developed since Rutgers College defeated what is now Princeton University in the first college football game in 1869.

‘Commercial Value’

“The free market has to operate and these students athletes have the same rights that everyone else has to take advantage of the commercial value of their names and likenesses,” Roger Abrams, Northeastern University School of Law professor, said of today’s decision.

The NCAA disagrees with the ruling, chief legal officer Donald Remy said in an e-mail.

“We note that the court’s decision sets limits on compensation, but are reviewing the full decision and will provide further comment later,” he said.

The NCAA, which had $912 million in total revenue last year, including $838 million from television, championships and marketing-rights fees, is facing a barrage of challenges from current and former college athletes to secure compensation, better medical benefits, control over their images and labor protections.

Athletic Programs

The organization on Aug. 7 granted its biggest athletics programs autonomy, allowing the five wealthiest conferences to consider offering extra money and other benefits beyond what current scholarships allow. Under the new structure, the autonomous conferences could start making independent decisions within their group as early as next year. That group of 65 universities includes Notre Dame, which is independent in football and an Atlantic Coast Conference member for most other sports.

Wilken ruled that the NCAA can’t prohibit students from getting paid for licensing their their names and likenesses up to the full cost of attending school. She also said the NCAA can’t bar schools from offering to put a share of licensing revenue aside for players, to be paid after they leave school. The NCAA can cap the payments, but they can’t be less than $5,000 for every year of play, she said.

The NCAA can still block players from endorsing products and enforce academic eligibility requirements, she said. Her rules take effect at the start of the next football and basketball recruiting cycle.

Former Athletes

O’Bannon, other former athletes and their antitrust experts told Wilken during a three-week trial in June that the NCAA operates an illegal price-fixing cartel that excludes players from contracts among member schools, broadcasters and other businesses that earn revenue from using athletes’ names, images and likenesses.

O’Bannon testified that he doesn’t believe NCAA student athletes are amateurs, and that sports, not academics, define their college experience. Student athletes, even Little League players whose televised games are generating revenue, should be allowed to share in the proceeds they generate, according to O’Bannon, who now sells cars in Las Vegas after playing two years with the National Basketball Association’s New Jersey Nets and also in Europe.

The NCAA and broadcasters warned that paying players could lead to teen athletes with agents, fewer teams and waning fan interest in collegiate sports. In addition to betraying the organization’s core value of amateurism, compensating players would damage the popular appeal of college sports and prompt schools to quit Division I competition because big-money schools would have the funds to attract the best athletes, NCAA President Mark Emmert testified in June.

Team Activities

Emmert and lawyers for the NCAA argued at trial that academics go hand-in-hand with competing in college sports, disputing O’Bannon’s claim that student players are primarily athletes, with team activities dominating their schedules. Emmert said he didn’t consider it to be commercial exploitation to have student athletes appear on posters or at press conferences that include corporate logos.

Wilken said in her ruling there wasn’t credible evidence that consumer demand for the NCAA’s sports would decrease if student-athletes were permitted, under certain circumstances, to receive a limited share of the revenue generated from the use of their own names, images, and likenesses.

The athletes separately reached settlements totaling $60 million with the NCAA and Electronic Arts Inc. over claims that their images were used in video games without permission. Wilken granted provisional approval to those accords on July 24.

The case is In Re NCAA Student-Athlete Name and Likeness Licensing Litigation, 09-01967, U.S. District Court, Northern District of California (Oakland).

--With assistance from Joel Rosenblatt in San Francisco and Eben Novy-Williams in New York.

To contact the reporter on this story: Karen Gullo in federal court in Oakland, California, at kgullo@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg

National Collegiate Athletic Association rules barring student athletes from seeking a share of its $800 million in annual broadcast revenue are illegal, a federal judge ruled in a decision that may sweep away players' amateur status and opens the door for them to be...